You Never Knew What Hit You…

by Colin Berkshire

Colin here.

Retailing “complexity games” are very frustrating. They range from the low-ball monthly price for Comcast service that then balloons after a few months to termination fees on cell phone companies.

I ran into one “complexity game” that I found to be especially disingenuous. It was with a US airline.

The simple summary is that you may be getting screwed and bumped intentionally, not by accidental overbooking. Here is how the scam works:

You and 200 other people buy discount, non-refundable tickets for an upcoming trip. You get a great price.

When you go to reserve a seat, there are none available, and you are told that you should get your seat assignment when you check in. Unbeknownst to you, seats are available, but because you are on a super-cheap ticket, they are intentionally blocked from you (this is the scammypart).

The airline continues selling tickets until the airplane is fully booked. Then, some extra seats are oversold to accommodate reasonable expectations of cancellations and changes. So far, so good.

Now, the airline does the sneaky part: They decide to continue selling tickets well beyond any reasonable expectation of cancellations. But they jack the price of these tickets up. So, the ticket you bought for $350 now sells for $1,200. Some people have little flexibility: perhaps a family member is sick or has died, or perhaps a business simply must send somebody for last-minute travel. The airline knows with a very high certainty that the $1,200 seat is oversold badly…beyond any reasonable expectation that there will actually be a seat available.

The scam is that the airline then opens up seat assignments for the $1,200 ticket and the passenger is assigned a reserved seat. This assures that this expensive $1,200 passenger will fly. Meanwhile, your $350 discount ticket still doesn’t show any advance seat assignments being available.

When the time for check-in finally arrives, the held-for-expensive-seat reservations are freed, and whatever lucky remaining passengers can fit into these are assigned seats.

This results in overbookings going primarily to the people who booked early on discount tickets. These discount passengers are then routinely denied boarding, and are offered a nominal compensation package…such as a refund and perhaps $200 plus a flight out on a surplus unsold seat the next day.

Now, do the math: The airline just reneged on its contract of carriage for the cheap passenger by trading them out for a more expensive passenger. The cost of refunding the $350+$200 to the cheap passenger is a small price for the airline to pay to snag a $1,200 passenger.

The result of this brilliant game is that airlines now knowingly oversell flights, knowing they intend to bump lower paying passengers. It is more profitable to pay off discount passengers than to pass up a $1,200 sale.

What this means is that when you buy a discount ticket your chances of being bumped are much higher than with a full-fare ticket. This trick is done using the “no advance seats available for cheap tickets” trick. Thus, the airline is reasonably assured that the pool of bumped passengers will be the cheaper ones.

You never knew what hit you.

The best defense is to always get a seat assignment when you book your ticket. Though good luck with that on a cheap ticket.

The practice of pricing gimmickry which is almost unethical is increasingly important in telecommunications. It can be the difference between profitability and bankruptcy.